Knob and Tube --what a Buyer needs to understand

I'm not a home inspector and I'm not an electrician. I've been around enough inpsections at this point and bought and sold enough homes in areas like Leaside and yonge and lawrence to know a thing or two.

Here's the deal. Knob and tube is considered by insurers to be a riskier form of wiring. It's not grounded and in the insurers world, safer wiring has come to replace this older wiring. Many homes still have knob and tube wiring and it powers the house just fine.

But...over the last few years and certainly over the last few months, it appears there's been a movement of fewer and fewer insurers looking to underwrite homes with knob and tube wiring.

When you inspect the house you purchase, the home inspector is able to give you some sense as to whether or not the house has any active knob and tube wiring. That's pretty much the extent of what an inspector can provide. Unless the inspector opened the walls and had complete access to the attic, etc., they really have to go on an educated guess based on location of house; age of house and any reno's done where wiring may have been updated.

Now, when you go to get insurance on your house, the insurer will ask if there is knob and tube. When you reply --yes..you will learn the position that particular insurer takes. They may tell you they have no interest in insuring you and to look elsewhere; tell you they will insure and provide you with a binding letter to remove all within 60 days of ownership or at least reduce to say under 25% or 10%.

A client of mine learned this week that TD Insurance who for years was insuring knob and tube homes, has walked away from this business (unless you hear differently).


Some insurers will provide you with a binding letter and then mandate that you have a certified electrician come to the house and infact verify the exact percentage of knob and tube and then slate that into a sliding scale of premiums.

The best you can do is call around insurers and learn their positions before you buy.

There are some niche players who underwrite these homes, few questions asked.

At the end of the day, the arguement is...if you're buying a house to reno, you're going to be updating the wiring to run you're high efficiency appliances so the current state of the wiring doesnt mean much.

Also, paying a premium to insure is an annuity. It often pays to get rid of the knob and tube as a one time fee and update.

These decisions of course find their way into the calculator along with your other costs depending on the exact house you buy.

Do not be afraid of knob and tube and do not pass up a great house because it has it. By the way, most homes with knob and tube are also of the vintage to have water boilers in the basement to heat the house. Guess what....these boilers are often insulated with a thing called "asbestos".

Want other things to worry about....
buried oil tanks
lead pipes
tree stumps blocking old clay pipes carrying out sewage

I'm just joking around. The point is...know the age of the house you're buying. Know what to look for. Alot money for work that may need to be done and if you're lucky enough to find a great character house in one of the best locations in this great city-enjoy it!!

Cheers-
http://www.TheSmithsBuyAHouse.com
mgruenstein.blogspot.com
mgruenstein@trebnet.com

Who is enjoying the Toronto Real Estate Market these days?

Well the answer to that really depends on what side of the coin you land. Simply put, if you're a Seller in a hot pocket in the city and you've priced the listing well----it's a great time to be a Seller. Supply continues to be low and interest rates are very low. I laughed when I spoke to my Banker this week and told her that for the first time as far back as I can remember, it would make sense to pay off a line of credit with a mortgage (at these rates).

That said, let's look at the flipside of the coin. Buyer's are stumbling over each other's feet in hot pockets. I was on an offer presentation last week where there were 20 plus offers on a semi detached in one of the most sought after areas in the city.

Respecting the privacy code, I won't get into details, but the house sold way above asking. I personally wouldn't feel comfortable repping a buyer and winning in that bid. But hey...if the Buyer is happy (and if they get their finaning), who am I to talk?

It's been very tough to be a Buyer in many areas. Buyer's trying to beat the clock on interest rates and avoid multiple offers may do themselves a favour and pack their bags and leave the market behind.

If you're a intelligent Buyer these days, you're still viewing supply; you're studying the market; you're okay with not purchasing "outliers" (those that sell well beyond what comparables would suggest); you're okay with a bit of a bump in rates; you're understanding the process of purchasing; you're well positioned with an agent who has a few avenues outside of MLS to hedge that you'll hear about any/all opportunities and you're not on MLS.ca every 10 minutes making yourself crazy! I keep hearing how "fun" that is. It's not "fun"! If I really wanted tickets to see the Leafs play the Habs, I wouldn't wait and check a single website every 10 minutes hoping some tickets pop up. I'd "work smartly" to get those tickets and explore every avenue available.

I used the Leaf example because Leaf tickets are almost as expensive as buying a house!!!

Stay level headed Buyer's. We're all hoping to see more inventory these days. There is hope yet!

Something bigger then Real Estate>>> http://www.tjzmommy.blogspot.com

I decided that over this long weekend, I'd like to pay tribute to an old friend and her family and pass on her story and her life. This is her story. http://www.tjzmommy.blogspot.com Please read and please find it in your hearts to give.

Updates on market and strategies will follow after the longe weekend.

Best,

Michael Gruenstein MBA CSC
Re/Max Realtron
http://www.TheSmithsBuyAHouse.com
http://www.mgruenstein.blogspot.com

When Bully Offers don't work...Enter the..."Poison Pill". DEADLY

When Bully Offers arent enough. So you bud the line because youre not waiting 7 days for offer date youve got a stellar offer with no conditions and you want this house. So you register your Bully and wait to hear if the seller is enticed. The Seller isnt. Based on showing numbers and lack of inventory, the Seller has decided to wait for the actual Offer Date.

Advantage:Lost!

But wait, surely theres something "new" out there that can keep you alive and force the hand of the Seller in the wake of 10 competing bids on offer date!

Welcome the slowly increasing practice...the "Poison Pill" Offer.

Buyer Agent brings in what they believe to be the best offer and gives the Seller 20 min to decide or the offer is dead. A really risky move that can backfire but one just worked leaving 6 agents getting calls in their cars that the Seller just accepted the Poison Pill Offer and all 6 who have yet to present are done for the night!

What's next?

To learn more or chat around this..call or email anytime

Cheers-
Michael Gruenstein MBA CSC
Sales Representative Re/Max Realtron http://www.TheSmithsBuyAHouse.com http://www.PropertiesintheGTA.ca Blog: http://mgruenstein.blogspot.com O:416.782.8882mgruenstein@trebnet.com

Preapproval Certificate VS Mortgage Disbursement -You were preapproved but your house was rejected!

I'm going to make this entry quick. Really, this is your bankers or mortgage specialists job to explain....but it impacts you and me and some financiers aren't doing a good job explaining how this works.

When you go to your bank of choice and apply for a mortgage, you are taking the first step, looking to be "PREAPPROVED". Let's not get technical. All the bank does at this stage is look at your credit scores and your income and debt levels and ensure that you'd be able to service the extra debt burden known as the mortgage with your current income stream and your current debt obligations and that no more the 35% of your income is being eaten up by paying your monthly mortgage.

On top of the mortgage amount the bank preapproves you for...you then put your downpayment. The total of which will determine the HOUSE PRICE you can afford.

Now, you're well into the game of looking at homes. You've located a home and are bidding on it. You win in the bids. NOTE******* your bank sometime before the closing date will send an appraiser to the property. The focus now shifts from you being able to afford the debt to the bank believing that you paid the right amount for the house. Should they dispute that number, they will forward the mortgage amount but you will now have to increase your downpayment to offset the lowered valuation. Remember the bank is using your house as collateral in the event that you go bankrupt or the market shoud correct, the bank wants to feel as good as they can that you paid "market value" for the home you purchased.

In today's environment with low inventory and plenty of bidders, some buyers are paying wacko dollars for homes. Maybe they didn't understand that the preapproval differs from the final mortgage disbursment which takes place following the bank satisfying themselves with the purchase price on the agreement. Some deals are struggling to close of late b/c the valuations the buyers aloted to the home just don't add up.

So now you know that the bank first approves you as a Buyer. Later and only after you buy does the bank approve the actual house!!

This needs to be understood by erach and every buyer and again a claim can be made to use an agent who knows what's going on in the area of interest to you!!

Keep the comments and questions coming by email.

Cheers-

Michael Gruenstein MBA CSC
mgruenstein@trebnet.com
http://www.TheSmithsBuyAHouse.com